Australian entitlement is in for a great shock

Australia's business environment is unsustainable, and propping up dying companies like Qantas rather than improving competiveness will only make the problem worse, writes David Llewellyn-Smith.

Throughout this year, and much of last, I have been arguing two central political economy points. The first is that Australia is on the verge of an economic reckoning of a magnitude that few understand. By that I am referring to our post-China boom adjustment.

This is most commonly called the end of the "mining boom", or even more particularly the "capex cliff". But it is much bigger than that. It is the end of a series of booms that have left our economy so bloated, and our real exchange rate so high, that we are unable to compete successfully in just about anything that is not buried in the ground or concreted into it. That is why this blog is called Houses and Holes.

The second point I've argued is that our economic mandarins of the day - Labor, Liberal, the executive and monetary authorities - would be serving the nation best by getting ahead of this adjustment. They should be preparing the nation for a generational belt-tightening; they should be talking down costs and talking up productivity; they should be enacting new policy settings ensuring that we preserve every potential dollar of export revenue available to the economy; they should have done whatever it took to lower the dollar; they should have innovated policy to ensure housing stayed in its box; they should have done what it took to ensure some diversity in our economic output; they should have given us all the reasons why it was needed, over and over again.

Instead, we've gone on as if nothing has changed. The Gillard Government wasted years trying to talk up spending in prudent households; the ever so brief Rudd Government mentioned the challenge ahead but then gave into a wild series of thought-bubble spending promises; the Abbott Government is new but so far it has accelerated the bailout mentality and promised wealth through house prices.

Throughout all three governments, the Reserve Bank has plumped expectations of endless riches via the eternal mining boom, has re-inflated asset prices, and barely mentioned competitiveness (though it has discovered productivity lately). The Treasury has been just as bad, offering repeatedly absurd forecasts for growth, government revenue and surpluses (though it too has discovered productivity lately).

We have, in short, done absolutely nothing to prepare for what is coming. We have pretended it's not happening in the hope that something will come along.

None of this is new but I wish to make two points today. First, this week has shown that despite our denial, the adjustment is accelerating. Throughout the last three years, MacroBusiness has argued that we face a long and arduous period of below trend growth because of our multiple adjustments. And so it has proven to be.

Despite a brief spike in growth in 2011/12, the post-GFC period has been the lowest average growth period anyone can remember. We are now growing more slowly than the supposedly broken United States. This week's national accounts illustrated why very clearly. The terms of trade correction which is central to the adjustment is pulling down national income.

The weak nominal growth that results has implications for the Budget, which will reveal further downgrades and larger deficits next week. Lousy income growth also makes our efforts to grow out of the funk via the old sources of asset inflation and household spending unsustainable, and it means demand is not strong enough to support many businesses, and anything tradable is being dragged under by bloated cost bases, which is what we are seeing in GrainCorp and Qantas.

The second point to make today is that the response to these hard facts this week has been even greater denial. The best way forward in our situation is to let markets restructure businesses to become competitive. This should be combined with a historic national program to improve competitiveness so we preserve and build on as much that we're good at that we can and protect the vulnerable as it happens. The RBA's efforts to "talk down" the dollar this week are an almost laughably inadequate response. Re-structuring is the only thing that we can do to sustainably preserve our standards of living. If we just prop up dying businesses, they'll bleed us dry just as surely via falling productivity growth.

The new Liberal Government has led the bailout mentality this week, blocking the GrainCorp buyout, mulling Qantas rescues (though the signs are better today), negotiating to extend the GST to online retail despite it costing more than it makes, and generally failing to provide a narrative that explains any of it. I have no doubt that the Labor Party would be just as bad if it were in power, strongly suggested by the winks and nods coming from across the aisle, and the clear focus of comments focusing on the preservation of jobs.

But the failure is so much wider. The press hasn't grasped the broader trend, with much conservative commentary falling in behind Liberal Party mistakes that contravene their own principles (not all!). And the liberal press tending to discuss each issue in a silo. I've had more furious debates on the blog this week than at any time in three years with readers defending sectional handouts. Almost nobody is talking about or wants to confront the underlying issues.

All of this has led me to conclude that we are far less prepared for what is coming than I thought. Yet this is only the thin end of the wedge. It's going to get much harder and many more businesses will fail under similar pressures. There appears little hope that our leaders will push the nation to get ahead of it either so each issue will be dealt with on its own terms, ensuring confusion and disaffection spreads more widely, and more businesses fail than need to.

A great shock is coming to Australian entitlement in the next three years. It's called capitalism my friends and it's here, ready or not.

This is a slightly edited version of a piece that was originally published at MacroBusiness.

Steve F:

JohnC:

06 Dec 2013 9:58:41am

Bangladesh is way to pessimistic. Try China or even South Korea, nations that we have to compete with. Australia's labour costs coupled with a high Australian dollar does present some very serious issues. David Llewellyn-Smith is right and his article raises rational argument. Clearly the honeymoon is over and it will take a lot of political courage to put in place remedial action. I don't agree that wages should be the only shot in the locker. The total answer must include severe and deep cuts to middle class welfare, something that the Abbott government will run a mile from.

casewithscience:

Yes, and the poor short-sighted economic policies of the right continue.

Look, the problem (almost unique) of the Australian economy is one of investment. It almost universally comes from overseas.

The greatest inhibitor to the Australian economy is that wealthy people in this country sink their funds into real estate and not into actual industry.

Real estate is a conservative, easy investment, but by sinking all of our excess earnings (profit) into property for the last 20 years, rather than building new businesses (or establishing networks of businesses in other countries) we have effectively shoved the property market into massively high territory (Only Tokyo and NY are more costly, on median, than Sydney). This means, in order to allow the mere essentials in life (like shelter), workers need to bargain for much higher wages.

The only reason this hasn't been catastrophic to date is that Paul Keating, very smartly, created a huge pool of investment capital through worker savings which has been put to investment purposes (ie Superannuation).

If you want to blame anyone for the "shock that is to come" then don't blame workers who can barely afford the massively overpriced property and rental market for arguing for decent wages. Try blaming the wealthy owners of capital who have been too timid and short-sighted to establish actual industries of value and innovation in this country.

Whitey:

06 Dec 2013 7:36:04pm

CWS, I'm not sure we are heading for a real reckoning, but it is possible, and if it is true we will have an enormous adjustment to our standard of living. It will be across the board, and it will mean bankruptcies of businesses large small and private citizens. It doesn't discriminate between classes, and rich and poor can end up destitute. It won't be workers fault per se, but they will probably bear the biggest cost. There is no doubt that as a nation we are living beyond our means, but we all hope for a miraculous soft landing. We are, after all the lucky country, but it's not guaranteed.

MikePS:

06 Dec 2013 5:55:49pm

I think John C is spot on. We need to identify exactly who we are competing with and what we are competing over. We are not competing about sewing cheap shirts, we are competing over the provision of high-end services. South Korea and China have had their eye on the ball and have invested in these areas and we are now competing with them, and this competition will get worse. It will not be very long before we start deciding to send our kids to China to get a good uni education. But in the meantime we can clean up some of our waste, middle class welfare for starters. But the bloggers writing to this site won't be too happy about that - how many of them will be prepared to pay some higher taxes and forego their welfare benefits in order to get our house in order. Not too many, I suspect. It will always be someone else who has to do the lifting.

bob:

06 Dec 2013 6:42:24pm

For the same reason we discourage theft, it's bad for society. Why not just put every job out to minimum tender so people starve or live in shanties like other countries. We could go further and just go around robbing people at gunpoint .... after all that is also a business, with risk, investment and profit/loss ..... free enterprise should have free reign.

blax5:

06 Dec 2013 6:50:43pm

If the wages are so tight, however, that people no longer have anything for discretionary spending like the fast food and retail workers, even bank teller staff in the US, the economy as a whole chokes. Maybe there are enough shareholders who keep the economy ticking over, but I doubt it.

People who get food stamps like the above-mentioned workers buy only food and second-hand clothing and you don't have much of an economy with that. It's a fine line and once millions scrape the bottom it is extremely difficult to get out of.

Mycal:

06 Dec 2013 7:06:07pm

libpotato I agree, let's start with yours, how about a 50% cut. I mean you are just another market commodity aren't you? With a post like that I would even go so far as to say, not a very bright commodity either.

As for bloated wages, well mine aren't and as a shareholder in Australian companies I have seen my assets decline by 5% since the Libs got in. I suppose you think the only decent income for working people is a third world wage?

BTW the share of company income going to wages and salaries has been declining for years, the amount going to profits has been increasing. Maybe you should consider where the "bloat" actually is?

Dinkum:

06 Dec 2013 10:38:38am

Not sure why you singled out Bangladesh, but why should Australian taxpayers subsidise Australian businesses and labour,multiples of what it costs to buy products or services of equal quality elsewhere? That is regrettably the underlying reality. Australia has too few people to pay for the infrastructural costs of of maintaining a continental-sized nation. Too many people living on the taxpayers expense in remote areas and contributing less to the per capita GDP than they take. And a domestic business community and labour pool that believes that, somehow, Australians have a natural-born right to be paid more for less hours and less productivity than equally or better skilled suppliers and labour elsewhere. Look on the labels of the clothes you are wearing. Where we're they made? I'll bet not one item was made in Australia. If they are not, you are standing there wearing proof that you are in denial of the realities afflicting Australia. Some of those clothes in your wardrobe might even have come from Bangladesh.

Wun Farlung:

06 Dec 2013 10:49:41am

You've got it mate, it's same as the phrase that is thrown around that means less money more work " increased productivity " and it rarely applies to upper management or board members.They can usually divert scrutiny by blaming unions, high wages, high dollar, etcIn saying that, maybe it is a sign of incompetence that the masters at QANTAS that they haven't completely managed to avoid the spotlight this time around.QANTAS held a monopoly in Australia for years and all they managed to do was drive loyal customers away with poor service, worn out planes, ridiculously high prices particularly on domestic routes and invest in a cut price venture that is a lemon

Tom Martyr:

06 Dec 2013 5:45:52pm

QANTAS isn't sexy. They're for regular business travellers who want that extra bit of coosh because they've earned the miles and the Q club gold card. The rest of the passengers are cattle with the only redeeming feature being that you can get a free drink after 6pm on domestics and a Margharita for $15 at 8am if you're so inclined.

Virgins are sexy. The stewardesses are a little prettier. The prices for anything are ridiculous but aside from that theres not much difference in service or lack there of. For domestic travel its a coin toss

..personally I'd travel QANTAS locally if given the option but it does seem like they're bored with their business now and just running it by the numbers whilst Virgin still has some creative spunk about it. Hard to make a profit with fuel prices and competition these days, the demand is only just becoming big enough for two main Airlines nowadays if operating on a shoestring and outsourcing maintenance and the bits and bolts of operation.

casewithscience:

06 Dec 2013 5:45:46pm

... in which case, there will be no Australian consumers (cause they have no money from lack of jobs), so wages will drop massively so that people can afford just the necessities, which will make our industry more competitive.

The Truth:

06 Dec 2013 10:53:19am

No my friend, the only way to maintain Australia's living standards and keep our workers in good jobs is to keep them in efficient and productive sectors that are export competitive.Australian industries such as agriculture, mining , and increasing services such as education and tourism will grow in demand as Asia's economices industriliaze and the growth of the middle class extrapolates.

The author is not arguing for cutting wage levels and anything for the sort. However structural changes to the economy is inevitable termed opportunity cost in economic theory where uncompetitive manfuacturing industries will die out no matter the level of government subsidies put in .The australian automobile industry is on its last legs- its simply impracticle to keep on propping it up, unfortunately the only way for Qantas to survive is to remove the Qantas act regulations and allow for foreign investment.

I think we would all like to see Qantas run by foreigners then no Qantas at all which is where it will be heading very soon. the sad reality is jobs will be lost , but hopefully the government can fund retrenchment and assistnace packages, economic reality dictates there will be short term pain for long term employment growth in the future.

Mycal:

06 Dec 2013 7:10:54pm

Your handle is emblematic of your post The Truth. We have had to opportunities to this (the mining boom and post GFC restructuring) and blown both. I am not so sure we should be so lucky to pull it of a third time.

Mycal:

Under the mushroom:

06 Dec 2013 10:56:57am

Restructuring means new found FreedomsFreedom to explore other opportunities in employmentFreedom to gardenFreedom to spend more time with the family Freedom to work from homeFreedom to seek alternate /housing arrangementsFreedom to explore new culinary artsFreedom to explore new travel arrangementsFreedom to use less energy in the home

greenspider:

06 Dec 2013 5:18:30pm

Freedom to learn to play a musical instrument instead of relying on being entertained by somebody elseFreedom to travel by bicycle instead of spending a fortune on a carFreedom to teach oneself how to knitFreedom to learn to sewFreedom to learn how to make one's own beer and breadFreedom to learn to make one's own leather goodsFreedom to take time to learn what sort of person you voted for last timeFreedom to learn such things as giving a massage to one's significant othersFreedom to get to know your neighboursFreedom to practice speaking in publicFreedom to write a play, a song or a poem to express your inner feelings

Jimmy Necktie:

mortan:

06 Dec 2013 11:00:31am

Steve F: Mate what happens now is Aussies don't want to get their hands dirty doing crappy jobs everyone wants to drive the truck so others are coming in to do those crappy jobs. So when the wheels fall off the truck you will be mowing their lawns if you want more than a subsistence payment.

rod:

So Steve, when King Knut sat on his throne before the incoming tide, could he simply say "shove it"?

It's all very well to say shove it to something unpleasant, but such an ill thought out remark does nothing to stem its coming.

You Steve, owing to the imbecility of this land, may very well have no choice, however many times you say "shove it".

How are you going to counter this forthcoming downfall? Investment in the education of the children of this land would be an excellent long term strategy, but we have been too mean spirited and lacking in foresight to bring into being what should have been a no brainer the day Bob Hawke began fatuously banging on about the "clever country". We would be much better placed now to "shove it" would this have been done. Now we realize that our economy is nought but houses and holes, it is just too late to do anything but accept our downfall and suck it up. I tell my daughter when she asks why we build so many houses that "it's all part of the Easter Island Statue Industry". The company I work for has most of its advanced manufacturing done overseas, and its income is earnt mostly overseas and it cannot find anything like the expertise needed to do any of its tasks here. There is the important sector of Agriculture, but that's about all we do that is real. We couldn't even get a fair return for our holes: when someone tried to introduce the MRRT to try to right this situation, they were howled down. Look up Norway and how it has fared from its holes and WEEP.

Now you've all elected the king of imbeciles who wants to run education further into the ground.

My children have dual citizenship. We are leaving. That's how I'm going to say "shove it", Steve. What are you, or more importantly, your children going to do?

Heretic:

06 Dec 2013 6:16:47pm

Rod,

I couldn't agree with you more. This country is wonderful for raising children (it's safe and sunny) and for retiring in.

The way our society could turn the dire situation around is to emulate some of the better European ways, such as government funded skills training and free education, instead of importing the skills for the short term.

The heavy subsidisation of manufacturing in this country since the 1970s or so has been proven unsustainable and, worse, ineffective, as the products produced were second rate by world standards at best. It's training that we need to invest in not funding managerial salaries.

And to all those who would have the Australian people slave away at half their current salaries/wages, I say that if you pay peanuts you get monkeys.

Taking Germany, as an example, its workers are paid decent, living wages, they have high-level social benefits, six weeks paid annual leave, more paid public holidays than we have here, extra paid leave entitlements for moving house, taking a cure and much more. How is it then that this country has a much higher productivity rate than Australia and its products are well-made and competitive internationally?

Craig of Bathurst:

Probably not, Steve, but bloated entitlements contained in industrial agreements between unions and, for instance, Ford and Holden, have contributed greatly to the failure of those companies.

And the managers of those companies are to blame. They took from Paul (the taxpayer) to pay Peter what they couldn't afford to pay for themselves. The unions, Labor and the ABC will now blame Abbott for turning off the handouts.

Jimmy Necktie:

06 Dec 2013 6:04:03pm

I don't depend on the government for my living standards. I get paid a salary and conditions I negotiated with my employer.

As for services, I pay my taxes and watch the news and I see better roads in Afghanistan than in the main street of my town. Two teenagers died in separate accidents last year directly blamed on pot holes. There's aprox 100,000 people in this shire, it's not remote.

So no, I work for what living standards I have and I expect I'll be ok.

Mycal:

RayS:

06 Dec 2013 12:37:28pm

Once again, a catastrophic mistake by Alan Joyce. His ham-fisted crisis gambit to screw the government out of some corporate welfare money has resulted in Standard & Poor's downgrading Qantas to "junk status".

Another colossal stupidity from an aggressive CEO who likes conflict. These blunders are getting worse - this far exceeds when he grounded the global airline in a battle with the staff which immediately lost Qantas $90 million in a weekend.

I used to fly United (the old PanAm) and the same symptoms preceded their collapse - management fighting with staff.

The CEO needs to go, without a payout. The board needs to go and the airline should be nationalised at current junk value.

Then a decent CEO like the one at Virgin who has kicked Joyce's arse should be installed. There are no excuses for Joyce and the board, the real issues are there to see in the annual reports from the past few years and in bad decisions.

Michael:

06 Dec 2013 12:38:01pm

Of course you say shove it.But when it comes to buying Australian made cars are you one of the 8% of Australians who drive one for instance or did you buy the overseas made vehicle made overseas often by less paid workers. Do you support dairy farmers or do you buy the cheap milk at a $1 a litre which is below the cost of production. Many in Australia like restructuring when it doesn't affect them, when their wages aren't reduced so they can buy the cheaper product but scream and whine when restructuring affects them financially and personally. Are you one of them like the majority. If so you are too blame and shouldn't complain.

Mitor the Bold:

06 Dec 2013 12:55:32pm

How about workers in, say, Munich??? BMW seem to be doing alright in spite of their high pay - it's not the pay and conditions that determine whether a business is any good - it's the product and the productivity. Ford, Holden and Qantas simply don't provide products that consumers want to buy at the prices they're asking - it's not a Liberal or Labor conspiracy, it's just economics.

ingenuous:

Well, Steve, it probably does mean driving down Aussie wages. That's a central feature of Capitalism: if you are worth less you get less.

Another feature of Capitalism (at least how we play the game here) is this idea of indefinite growth. The article mentions that we face a time of reduced growth. Well, whoopiedoo.

Growth must decline to zero at some point because we will have run out of resources. We can't go on with this infinite growth idea. It is insanity, even though everyone (including the author) likes to think it's somehow a rational concept.

So, when David writes "It's called capitalism my friends and it's here, ready or not," our response should be to say "well, let's fix capitalism", not "oh no, the great God Capitalism demands a sacrifice!"

I agree that "a great shock is coming to Australian entitlement" (I have never heard so much whining from 1st world people as I hear these days) but not because China is slowing down, but because we are reaching the limits of growth and our denial is so strong that all commentators, including doomsayers like the author, ignore that completely.

Silver fox:

Tom Martyr:

06 Dec 2013 5:22:35pm

we should convert the outback into giant Blue Agave plantations now. The arid soil and extreme temperatures are just right for the plant.

The only down side is they take 12 years to fully mature but i'm confident that with our biological research sector we can half that by the time the first lot is ready using gene splicing and a range of other fascinating agricultural teqniques.

Due to a plant disease in Mexico huge stocks have been lost whilst many farmers have burnt their harvest and moved away from the crop due to the time and cost of production. This apparently will lead to a worldwide shortage lasting years in the coming decade.

If we act now we can become the global exporter for a Down Under (the table) brand of ....Tequilla!!

Ducktagnan:

06 Dec 2013 2:26:56pm

No, but the pay and conditions are a big chunk of the problem.Australia is a very expensive place to do business. It all adds up - high salary/wages, workers comp insurance, annual leave, sick leave, superannuation guarantee, long service leave, maternity leave etc etc etc Media reports recently have revealed that Qantas pilots, by world standards, are highly paid, and assembly line auto workers are paid $100kpa plus. Is this true ?I can recall way back, when retail assistants' wages hit $100pw they all but disappeared overnight, and stores became serve-yourself.Clothing, textiles, footwear and most manufacturing went offshore years ago.Can't remember the exact figures, but when Lee Iacocca took over a failing and sinking-fast Chrysler in the US, he went to all of the auto plants in North America and told the workers he had 20000 jobs that paid $20ph but none that paid $25ph.Chrysler survived.Get the message ?

RgRedfern:

06 Dec 2013 4:33:30pm

Excuse me.... Ducktagnen.... Holden assembly workers' wages average at $55,000 per week..... this is the average. This was disclosed to Clay Lucas at The Age last June..... not disclosed to Lucas was the average take home pay of office staff, white collars or management and the prices demanded from allied business support networks. Currently, one in five Australian workers are employed by this curiously named... Business Support Sector..... which even the Reserve Bank felt obliged to release news for discussion to the marketplace as an unexplained and very curious drain on the economy. Not yet is there any reply....

So take this as an example.....BHP employs more office staff than it employs men and women on the tools who work in dangerous and very difficult circumstances. The costs of mining in Australia is the majority costs of maintaining head office.... the actual miner on the tools is in the minority.

So when does anyone comment on the Nation of Office Workers who perform tasks not even The Reserve Bank can identify just pull their bloody heads in and realise they could be also the problem not merely those on the tools. Well that would never happen, huffing and puffing and excuses will suffice even today. When one fifth of the labourforce are so far away from the production line, the handling, shipping and warehousing of product or facing the customers, how on earth can any public realistic dialogue be managed.

Qantas..... the hollowed out shell of an International Airline was primed for sale by previous management long before Joyce assumed his position. CEOs of that time were set to pocket millions of dollars if the takeover was successful. Joyce is not accountable for the actions of the previous or our high profile local elite Celebrity Styled Local Corporate Managers who purposely hollowed out Qantas for sale where they expected to pocket big coin. Joyce does however own the $200million lost through the grounding of the Qantas Fleet, and owns the $1billion thrown towards the Asian Marketplace shambles. My reference here to Paddy Manning on Crikey.com.....

casewithscience:

06 Dec 2013 2:43:08pm

Actually, productivity per worker in Australia is about 30 times Bangladesh and China.... and they are worth it because of greater education and product per input. Now, if Aus workers and Chinese workers were both manufacturing cars or making clothes then your criticism would be accurate, but that is not what is happening. Rather, Australian workers are escalating through higher profit industries.

The "bump" which we will hit is when those higher profit industries are not continuing to be created.

Sarah:

06 Dec 2013 2:44:02pm

:Quite simply Australian workers are not worth 10x more than a worker on China or Bangladesh"Does that mean you and all the senior execs of Qantas say are prepared to work for Chinese or Bangladeshi wages?

Come on such broad statements do nothing to advance intelligent debate.Chinese and Bangldeshi workers do not consume as much or have as much debt either=both of which drive our economy. have you thought about that?

Helen:

06 Dec 2013 3:00:13pm

Hi Mathew, to look at it another way, I do not accept that workers in 'China, Bangladesh, etc' as you call them, actually deserve to be paid 10X less than Australian workers do. To what extent are those workers actually underpaid compared to the value of what they are producing? On the other hand, there are a number of countries where workers earn high wages and their economies maintain sustainable industries - Germany, the Netherlands, etc...How do they do it? People pay higher taxes in exchange for better public services, and their governments develop industry policies which encourage the development of viable domestic businesses. some of which are so successful they are able to also export.

Nano Ninja:

Paulinadelaide:

06 Dec 2013 3:31:44pm

If I pay one of my fulltime staff $1,000.00/week.......They recieve $817.00/weekMy total costs to employ this person (excluding o/time, admin, training etc etc) is $1204/weekWith personal care, AL & PHols they may only work 44 weeks of the yearSo the actual cost to me for each week of work I get from them is $1422/week as opposed to the $817.00/week they take home.I don't think we're talking Bangladesh but the problem is we're pricing ourselves out of the world market.It either changes or my FT staff stand to lose their jobs. And frankly any employee, unlike employers, has few options to say "shove it".

TC:

RC:

06 Dec 2013 4:19:12pm

"Restructuring" means the ultra oligarchic supra rich paying their share of the Social "Infrastructure"."Restructuring" means that they will have to pay taxes again at 60% of their gross personal and business incomes.Doesn't it??We pay taxes on our gross incomes - why not them??Isn't that the "macro-economic" basis for running Society, today - Tax on gross incomes??Or, perhaps, "Restructuring" means that we'll pay taxes on our nett incomes, like them, after all reasonable "expenditures" have been accounted for??Who said balls to that??Do I hear, "that's "not cricket", old chap"??"We'll simply continue to export, via the Internet, our "Capital Incomes" before Society will be aware that we have salaciously gained any, old chap".I hear this cynicism echoing through the Halls of Power, already, as I finish this "contribution" to the inevitable debate, ensuing.Or, as in the far and near past, is the badly needed debate over already??If so, woe betide the "rest of us", the 99.9% of "us".

Trev:

06 Dec 2013 4:40:57pm

Steve F, I'm very afraid that we will have worsening working conditions forced on us by the rest of the world. It was revealed recently, that the average Australian Qantas worker's wage was in the region of $80,000 and the same for an Asian airline employee was $47,000. No airline can compete with this type of structure, so, it's either constrain wages and executive salaries and reduce other costs, or go broke. During the dust storm period in America there were plenty of tales of family men, who had no other option if they wanted their families to eat, of working for much less than they needed so at least their kids had something.I am very afraid we are coming into another period just as bad. America has to implode soon and when it does it will drag us all down with it.

Alpo:

06 Dec 2013 9:21:04am

David, the Liberals are totally unprepared for what is coming. They are torn by their own internal self-contradictions: the economic rationalists vs the protectionist Nationals vs the populist Abbott and his inner circle. When change is needed you MUST have the skills to bring the People with you... the Liberals, in just three months, have already lost all their capital of credibility. Whatever happens next it's just going to make their situation worse.

gbe:

06 Dec 2013 10:49:30am

Alpo: Sorry it's a bigger picture than Alpo versus Abbott from a safety of a cushy public service job.In the real word the rest of us live in business not being competitive go under in a global capitalistic culture the need to have smart management and committed worker?s with a winning product is what competition is all about. It's survival of the fittest out here no 37.5 hour week and a 9 day fortnight with flexi days carers and annual leave with long service after seven years get real Alpo.

Alpo:

frangipani:

06 Dec 2013 12:09:17pm

@Alpo - I think his point, and one I heartily agree with, is that neither the Coalition nor the ALP, nor indeed the Reserve, are at all prepared for what is coming, and none of them is showing any signs of wanting to be prepared. Certainly, the ALP has built in a lot of long-term debt, and the Coalition is carrying on with it as though nothing is going to change.

Alpo:

06 Dec 2013 6:56:21pm

rob, although I am not "effectively stating" that, now that you mention it, I invite you to think about the latest brain fart by Joe Hockey regarding GrainCorp. It is in fact the Business Council of Australia that was dismayed by that anti-business stance of this Government. This is just evidence of the nightmare of self-contradictions the Government is in, which was the point of my post.

rob1966:

06 Dec 2013 7:48:41pm

To be fair to Hockey, he was going to be ridiculed regardless of what he decided to do over Grain Corp - you for on would have criticised him if he gave the okay to sell, and you criticise him now for not giving it.

For Hockey it was a lose-lose position.

I'm not convinced he made the right choice, but I guess time will tell.

John:

06 Dec 2013 1:47:20pm

Alpo it might be still early days for the Liberals at the moment but don't you agree Labor/Green was totally totally clueless? that was why they were rubished dumped and we honestly can't go back to them period. So you rooting for the downfall of the current Govt is not helpful I know you are delighted when things go wrong. OMG Alp we just can't back to previous monumental disarray!

Alpo:

06 Dec 2013 7:05:55pm

John, I am not anti-capitalist, I am for a mixed economy, not for a centralised, state-controlled economy. I thought that by now that would have been pretty clear. Unfortunately, the alleged Labor "cluelessness" in Government is quickly starting to pale in comparison with the circus we have to endure every day.... In any event, although we may differ in our opinions I do know that you are an intelligent man and I am sure that you see the reality of the Coalition Government so far. Who knows, if they continue along this path may be that by mid next year even Jack the Stripper will look more appealing....

Sue:

06 Dec 2013 2:17:14pm

Alpo you politicise EVERYTHING. If you bothered to read ALL of the article, much of this occurred under the previous 6 years of labor "rule". We have lived beyond our means for a long time, and the chickens are coming home to roost. We have allowed ourselves to become uncompetitive on a worldwide basis, have flogged off most of our manufacturing and "trade" industries because they're not glamorous or instant-wealth making like mining, there was always going to be an end but no-one has ever bothered to forward plan further than the next election.

Helen:

06 Dec 2013 3:06:30pm

Hi Sue - What you mean is that we need is a thing called 'Industry Policy". I agree with you, but unfortunately the last time we ever saw industry policy was during the Hawke-Keating government. There's another name for that 'houses-and-holes' eventuality we may be staring down the barrel of: A Banana Republic. This is what Keating was warning us about, and trying to steer us away from. Howard abandoned that whole project of fortifying us against this eventuality - because Liberal Governments like to waste taxpayers money while claiming that governments shouldn't run anything, business should - and no one has properly picked up the thread again since.

SueB:

Sue, Alpo is stuck in a September time warp and finding it impossible to accept that his prediction that Rudd would win the election was a silly dream.

This is a good article, fair and balanced. Australians are in for a big wake up call, and those who haven't bothered to save or increase their skills will be paying a big price.

The LNP should bite the bullet and make preparations for the difficult times ahead. But it could cost them the next election, and the Left would just use their actions as another stick to beat Abbot with.

Alpo:

06 Dec 2013 7:12:13pm

"his prediction that Rudd would win the election was a silly dream"... My prediction was for a hung Parliament, SueB. I have explained this to all of you in countless posts already. Please do show some learning capacity... it's not hard.Abbott has only one tool in his hands to really shake this place up, and it is called "Industrial Relations".... he is most welcome to commit political harakiri....

hph:

06 Dec 2013 5:49:39pm

If you bothered to think for a while maybe you will realise that "labor rule" does not have the power to change our system which is Free Market-Capitalist Economy. Don't you know that we are operating in a Free Market-Capitalist Environment already?

You should look back what the Big Business did TO this country. They certainly did not do FOR this country. All they cared about was profits for their share holders. If the Big Business did not make any profit they shut the factory down in Australia and took their business to overseas sweatshops. Bugger the Australian workers! Freedom for everybody! How can "labor rule" stop a businessman or a company from doing whatever they are doing? Big mining companies in Australia are controlled by foreign corporation. So the mining profits go bye-bye to overseas offshore bank accounts.

Paulinadelaide:

06 Dec 2013 3:54:40pm

You know Alpo it's very easy for governments to get agrrement to spend money. It's a political killer for governments to unspend money. They've been there for 3 months Alpo, in Parlaiment for less than 2, with a hostile senate. Maybe post July 2014 the senate will be worse. But the thing is they have about 3 more years to go. Having just spent 6 years watching Labour I feel for you Alpo. 3 Long years.........................you'll be a mess at the end. And imagine if they win again .....another 3 years. ?'ll enjoy your pain Alpo.

Alpo:

06 Dec 2013 7:18:13pm

"I'll enjoy your pain Alpo"... Oh yes, the classic Liberal "sadistic touch"..... Anyway, don't bet your trousers on this Government running the full term. If they want to really go ahead with their original Programme they will face serious obstacles both before and after the 1st of July. If you think that a paralysed Government has any chance of re-election feel free to do so, delusion comes free of charge.

Tag:

Desert Woman:

06 Dec 2013 10:20:51am

We should all be over it. The corporate model with its single goal of maximizing shareholder value relies on an ever increasing population with ever decreasing wages, i.e. bullied into resigned submission. It is self defeating and coming to the end of its life expectancy.

Voyage au bout de la nuit:

06 Dec 2013 10:54:44am

I will add one further observation of too many bureaucracies and their management. They stick to their Business Models and do not innovate. They do not isolate their innovation away from their core business as pilot projects. They are run in accordance with accounting principles that focus on expenditure items (wages, utilities and tax) rather than their products and sales. GMH and Ford were great examples of such management limitations. The future is not about six cylinder cars racing around Bathurst while company fleets have died. If Ford, GMH, Toyota and Mitsubishi do not innovate towards cleaner energy then someone else will (eg the Chinese) and they will all die.

PS By "bureaucracy" I mean any large and unwieldy business and not necessarily public or private enterprise.

mortan:

06 Dec 2013 11:08:06am

Voyage au bout de la nuit: I agree it's not the governments job to save poor managers from their decisions. Too many inept CEO's getting big bucks for making a mess then putting the hand up for a rescue package let em drown.

Jbear:

Picker of Peanuts:

06 Dec 2013 10:47:30am

Spy,

I agree 100%. This is part of our punishment for trying to control our borders and for spying like every other country does and internet company does. And the punishment hasn't even started yet, wait until the punishment starts for the white Australia Policy and genocide of the first inhabitants. Then we will really know what punishment is.

whatif:

06 Dec 2013 9:26:11am

well now any one who has been listening should be prepared, they've been told enough, they need to save and don't spend on things they don't need, we are heading into a very dangerous time in Australian history and with an incompetent government at the helm the ones who will suffer the most is the ones on the bottom of the heap, that's the low paid workers, the old and the young, it wont affect any one much else as they don't work from pay day to pay day to survive, My old man told me years ago, your best friend is your hip pocket, and it has stuck with me and I can see he was right, its nice to have all the trimmings, its nicer to know you are capable of surviving and know how to go with out all the fancy things.

joey:

Peter the Lawyer:

06 Dec 2013 2:01:29pm

My old man was a very wealthy man and he told me that you should always be out to have some fun and ignore the lefty doom-sayers. he noted that everything is better than it ever was and that everybody these days lives better than a king did in days gone past.

So I blow the raspberry of derision at miserablism.

The world is a wonderful place and we have more chances than ever to get the most out of it. The biggest problem we have is lefty Eeyores constantly telling how bad everything is.

casewithscience:

Rob:

06 Dec 2013 3:05:56pm

Well I never knew Tony Abbott who spent six years telling us all how bad things were is a lefty Eeyore!!

BTW just how did your old man become wealthy? I would agree with him- you should always be out to haver some fun but not at the expense of the "fun" or well being of others.And yes the world is certainly a wonderful place and one we need to protect from the shysters who seek to have it all for themselves.The poor and the working poor do nothave the time to enjoy its beauty- even now we have the technology and resources to ensure the majority do have the time to enjoy it. As technology advances further that will only improve- providing its benifits are shared but not if inequaltiy continues to grow. " Not what we have-but what we enjoy constitutes our abundance" Epicurus.

Monty B:

06 Dec 2013 3:12:09pm

`lefty Eeyores constantly telling how bad everything is`

Peter we have just had a period of unprecedented negativity from a conservative opposition prepared to talk down our economic standing and fabricate a sense of financial `crisis` in the name of political ambition.

You don`t have to be wealthy to embrace life with gratitude. But I know of one ridiculously wealthy person who lets money stand in the way of a relationship with her own kids and constantly complains Australians are not more grateful for her industry.

Trev:

Tom Martyr:

06 Dec 2013 5:00:12pm

The doom is what feeds the fear that keeps the people in line Petey, if we all realised that we don't need to be so glum about the future we might actually realise that these self appointed people in charge aren't as needed as we once though and society as we know it would collapse.

harvey:

So there are two airlines. Virgin is doing well, Qantas is going under.

In most businesses this would point to incompetence of management, and I don't see why this would be any different for Qantas.

Alan Joyce is clearly not up to the job. He only has 2 ways of dealing with problems, one of them being sacking staff, the other being whining about having competition.

Really, the guy who lost out on the Qantas CEO job and is now powering Virgin along, is about 1000% of the CEO of Joyce. How long will it take the Qantas board to take effective action and get a replacement for Joyce.

Sadly tho, I'll bet Joyce departs with zillions of dollars of shareholders money. The wages for incompetence at CEO level are great these days.

Dean:

06 Dec 2013 10:06:58am

JetStar seems to be doing well. Joyce's initial plan was to turn Qantas into an airline like JetStar but he was not allowed. Whatever your thoughts on Joyce, he has not been given a level playing field.

Mike:

06 Dec 2013 10:27:30am

Alan Joyce was part of the management team that nearly sent Aer Lingus to the wall. He was part of the management team that destroyed Ansett. Now he is destroying Qantas. Insanity is doing the same thing over and over again and expecting different results.

think first...:

06 Dec 2013 12:38:55pm

Normally you would be right, one company doing better than the other means that the second company needs to improve. But what if the difference is caused by one company being prevented from doing what the other is already doing by a law that specifically targets them? (especially if the other company knows exactly the weak spot and targets it...)

One of the main problems Qantas has is that under the law that controls their ownership, they are not allowed to have the same capital structure as Virgin, placing them at a significant disadvantage. I don't like the way Qantas is being run at the moment any more than anyone else, but it is a little unfair to blame it all on management, who effectively have one hand tied behind their back.

Australia, as the article points out, is in for a real shock. One comment already stated "that if restructuring means driving down pay and conditions to say that of Bangladesh, then you can shove it." But why should our pay and conditions be any better than theirs?

Australia used to have the advantage of education - we no longer have that advantage. There are many countries that have far bigger workforces that work far harder than us, for less money, that are as well or better educated than we currently are.

Australia has not always been a wealthy country. It wasn't that long ago that most children shared rooms with two or three others and multiple generations lived in one house. It wasn't that long ago that most people left school in their early teens to go and work. If we really think we can't go right back to that same position in one generation, you're kidding yourself.

If we continue beleiving that we are smarter than our neighbours, that we work harder, that we are entitled to more and a higher standard of livinig - we will go the way of Greece.

We need to work out that our neighbours are as smart as we are, build and make things every bit as well as us and are prepared to work harder than us, if we want to continue to prosper.

How many of you are typing your comments on a computer that was designed in Australia, or made in Australia, or made by an Australian owned company???

Mitor the Bold:

06 Dec 2013 12:58:08pm

Well said. I only wish I had the opportunity to fail so spectacularly at such a high level through such incompetence and vanity then I too could retire into that harbourside mansion I've had my eye on.

ceedee:

Actually Virgin has only once posted a profit in the last year of Godfrey's leadership of the airline. Borghetti is forecasting a return to profit in 2015.

And that's the point. The foreign subsidized owners of VA (Air NZ, Singapore Air, and Etihad) are paying to keep VA afloat. Those 3 countries' tax payers are distorting the market in Australia.

Is that fair and reasonable?

Should Qantas be allowed to bring in capital from their partnership with say Emirates which is heavily subsidized - Qantas' other partners in the One World alliance being less subsidized) in order to be able to support its position as VA seeks to increase domestic market share above its current 35%?

Without the support of foreign capital VA would have to take action to bring itself back to profitability as opposed to seeking expansion (which may give rise to profits at some point in the future).

Poisonous Mushroom:

06 Dec 2013 1:03:42pm

Let Qantas die quietly by its own hand. It had considerable goodwill on privatisation, courtesy of its previous government ownership efforts. It seems to have gone out of its way under various managements to destroy that goodwill. Qantas became my airline of last choice with its customer apparent lack of simple aircraft cabin and terminal maintenance and rude, bullying senior check-in staff. And Joyce confirmed to me that Qantas no longer had any regard for its customers when he decided to strand all passengers for a day or so simply to get his own way.

Let the very smart (?) strategists and senior management get out of their self created problems themselves, or let them take Qantas to its corporate grave. Give Qantas no more consideration than was given to Ansett.

Rae:

Pete:

06 Dec 2013 1:20:08pm

Virgin is most assuredly not 'doing well', having sustained hundreds of millions of dollars losses, now helpfully subsidised by it's overseas government owners. That's not to say Qantas is efficient or well run: when pilots and long haul cabin crew earn salaries way out of step with their already-well-paid competitors, something's got to give. The engineers are also extremely well-paid, and the productivity of all of these workgroups is not very high. Nope, it's a race to the cliff face for both Virgin and Qantas. Irrational capacity management, and an inability to control labour costs are hallmarks of this dysfunctional industry.

peter of mitcham:

06 Dec 2013 1:30:33pm

I agree, Harvey. I will never understand how a person who has been a CEO and has run the company into the ground, is immediately head-hunted with a salary in the millions? Until we all suffer the same, no one is going to be the first, are they? I had a mate who ran a little grog shop and I would always say, "Come the revolution" and he would always answer that he'll be there too, selling grog to the revolutionaries as they celebrate.

TGU:

06 Dec 2013 1:43:01pm

The reason that Qantas is going toes up is obvious, on average it is about 25% more expensive to fly anywhere in Australia by Qantas as it is by Virgin and it is even cheaper still if you fly Jetstar. It's not rocket science, Qantas in not competitive so it's going broke comes as no great surprise. For quite some time now the move has been away from the more expensive full service airlines and towards the low cost no frills airlines and until Qantas embraces that concept it's on a hiding to nothing.

Gordon:

06 Dec 2013 1:45:37pm

When you say "doing well"....Both airlines are losing money. Virgin has a war-chest from a big overseas capital raising, so it can grab market share by losing more money for longer until the rival goes under. Under these conditions a competent board finds backup funds to fight back, and tries to cut costs where possible. The law prevents Qantas seeking equity funds overseas, while Virgin has no such constraints and pays lower wages. As you are obviously a far more experienced airline CEO than Alan Joyce, please tell us what you would do.

Paulinadelaide:

06 Dec 2013 3:41:48pm

Harvey..... Unlike you I don't understand the Airline industry well. But I believe your opening line is incorrect. I believe it should read There are 2 Domestic Airlines. Virgin with capital from its foreign owners is taking market share from Qantas. Qantas, hobbled by restrictions on obtaining foreign ownership capital is losing market share.

TC:

06 Dec 2013 4:11:40pm

This is extremely unfair. Virgin is an international company. It does not have to pay the world's highest carbon tax. It does not have to employ super expensive and spoilt Australian workers. Virgin cabin crew, pilots and baggage handlers get paid 2/3 of what Qantas staff do. Why? Ask the Unions. Qantas also has to compete with international airlines like Emirates and Qatar that are propped up by oil rich states. Virgin can have international investors; Qantas cannot. So the reasons and simply saying get a new CEO is simplistic - teh new CEO woiuld have to deal with all of the above just like Joyce./

gbe:

06 Dec 2013 9:42:27am

Well David sad to say your spot on the government can't keep throwing tax payers dollars at poorly managed non performing Australian bushiness there is no return for the tax payer it's money down the drain.

We have an unsustainable car industry now an airline whats next rail and road transport companies telecommunication and mining companies. Taxation is already a huge burden for many Australians and we are seeing health and age care failing through lack of funding.

Australia needs to smarten up the Hyundai motor company can now produce a car for less in America than Korea as they struggle with the cost of Korean Labor the Wheel Turns we need to be there when it rolls our way.

Oi Mate:

06 Dec 2013 1:55:38pm

So, are you advocating that we subsidise the car industries of other countries instead. There is not one country that doesnt subsidise there domestic car industry, Australian subsidises at one of the lowest per car.

Cutting off our nose to spite our face is one answer. An awful lot of blood on the floor though gbe. It will be you and I and everyone elses obligation to clean up the mess.

Anicol:

06 Dec 2013 5:35:41pm

cut & paste from an IPA report on EBAs in the automotive industry

"The Federal Chamber of Automotive Industries reported on 5 June 2012 that the industry pays more than $10 billion in tax to Australian governments each year, and employs almost 56,000 people in its three major vehicle manufacturers, its dozens of importers and its thousands of related component manufacturers."

Money down the drain you said?

For $500m a year a return of $10bn and 56,000 employed seems like a very good investment.

What do you think of subsidies for private health and private schools? would they survive without government assistance? being private companies should they receive government assistance?

James in Brisbane:

06 Dec 2013 9:43:41am

I don't disagree with the general thrust of your argument. But the denial thing is easy to understand, it's the same denial that confronts climate change, it's the same denial that Elizabeth Kubler-Ross described in her book 'On Death and Dying' in 1969. When confronted with any uncomfortable or existential truth, the immediate response of most human beings is to first go into denial. She then sets out the various stages to go through before acceptance.

It's not a logical response because we're not logical creatures, we're animals shaped by hundreds of millions of years of evolution to try to survive, even if that pursuit is irrational.

Peter the Lawyer:

06 Dec 2013 2:06:36pm

Nobody denies that the climate changes.

But, as Richard Lindzen, the world's leading climate scienctist, has just told the US Congress, there is no way that CO2 increases are going to cause massive increases in temperature or the cataclysmic weather events spoken of by some alarmists. In other words man made climate change is bunk!

It seems that 1/2 the climate scientists in the world now agree with Dr Lindzen.

The problem with the warmists' alarmism is that it is just so obviously another means for statists to increase government control of our lives.

M.S:

06 Dec 2013 3:19:58pm

Where did you pull either the idea that Richard Lindzen is a 'leading climate scientist' or that 1/2 of the worlds climate scientists agree with Dr Lindzen? That's seriously factually wrong and politically loaded, like most of Richard Lindzen's criticisms of the models and much of the Climate Skeptic movement in general. Not all, some actually have reasoned scientific arguments not motivated by political allegiance or grand conspiracy theories, but that's not the case here.

The few who deny its human induced and that it doesn't have serious consequences, when the science and models are pretty conclusive on the matter and supported by a majority of credible and important scientists and specialists are in the same kind of category of denial as this article warns against.

James in Brisbane:

06 Dec 2013 3:54:44pm

You misreprent Lindzen, and we're not talking weather events. Even very small increases in temperature cause massive effects on ecosystems, especially in arctic and montane regions. Further, he says nothing about ocean acidification and the current degradation of shell formation in arctic invertebrates. You are denying that human kind is changing the climate. That goes against the majority of scientists.

Tom Martyr:

'Alarmists' is such a derogatory term Petey, it conjurs up images of people running around in peticoats screaming that the sky is falling.

Can't we just call them convincetists or cautionists.and the other lot..unconvincdists or everythingsfiners?

Im a simple duckist as in if it quacks like one and waddles like one it probably is one.

when i see a huge truck spew out a bunch of black gunk into the air i imagine i wouldn't want to breath that directly. I also see the earth as a big inhaling and exhaling lung and i imagine its got a bit of a smokers cough about now. How that relates im not sure because i know the experts get things well wrong quite often and you and I are no experts despite our respective titles.

skeptic:

06 Dec 2013 5:06:51pm

James in beautiful Brisbane,

A tiny piece of unsolicited advise to you please....

Refrain from mentioning "Climate Change" when attempting to put forward any argument. Invariably, all the "scientists", "lawyers", "engineers" will come out and put their spins on it. Essentially, your points are totally lost before it even got a start.

Bruce:

06 Dec 2013 9:52:33am

I more or less agree with David, if by quite different reasoning. However, I think he has not recognised that in this slumping world Australia will not be alone. Indeed, take China's acceleration out of the Economic equation and this cake-pie might look more like a pancake.

I disagree with David about what we should be doing in the face of inevitability. He thinks we should strip down for more of the same Economic action, but as a contender rather than as a battered slob. I think that way just leads to self-destruction, maybe a bit later if we hang about for a round or two. But slobbery has nothing to commend it either.

I think we have to figure to get out of this game and into a way of life that we might live happily in for a long time.

The answer is not competitiveness. It is sociability.

Australia is one of the few countries that could demonstrate the true opportunities of sociability on a large scale virtually unilaterally. We could do no greater service to mankind.

Mycal:

06 Dec 2013 7:40:38pm

I have no idea what "sociability" means, but we don't have to change human nature Rusty, just industry policy. There are mountains of books and articles on how to structure industry (which by the way, is social organisation) to be more profitable, productive and globally effective. Perhaps we should just try and be a little smarter as a society for a change. It might mean we get to keep both our shirts.

Bruce:

06 Dec 2013 6:18:45pm

I think the essential elements of sociability are generosity, regard, respect and responsibility - towards oneself, towards all others, and to all places and situations.

These do not reduce the diversities of society, quite the contrary, but they express them in ways that are enriching of the whole (and of the individual members and places and situations) without the thoughtless reduction of the life experience of others.

I think more of society being vibrant and able and joyous than cohesive, integrated and accepting. I think sociability is a road to a much better experience of human existence rather than a retreat to the narrow boundaries that might be safe under the current selfish, political economic paradigm.

Peter the Lawyer:

You do know that people get together and co-operate for a common goal all the time without any need for government control or encouragement.

That's what is so wrong with the world-view of so many people today. They have become inured to the idea that anything can be done without political involvement. It is sad to see what our education sytem has produced, when people know so little about private enterprise and think that all solutions to life's problems can be found in politicians.

Bruce:

06 Dec 2013 3:24:41pm

I agree somewhat with Peter the Lawyer. What I would likely not have in common with him is the ends that the profits of enterprise should be put to.

I am not much in favour of spoiled little mindednesses seeking only to increase the size of the silver spoons in their own mouths - especially where their enterprises involve the reduction of what other ordinary folk might have had if those enterprises never existed - most lawyering for example.

Neither would I regard highly such folk cooperating to amplify their offtakes.

But I do think that sociable cooperation is a potent thing.

Competitveness on the other hand has very little to recommend it, even in sport or in jest. It is a waste of much of the true potential of its winners and of its losers and of its non-participants too. So in answer to your question - No I do not know that one can be both social and competitive, at least towards any end truly worth pursuing.

Rob:

06 Dec 2013 3:42:45pm

Sorry Peter- you make a good sensible comment about co-operation then you stuff it up by your comment on Government.Governments are like business-good and bad with most in between. Governments have always led in innovation,human rights, justice, social cohesion and such life matters.Are you aware that all the major components in smart phone are the result of research by Government agencies? A nuclear physist friend of mine has received over $100m in Government funding to develop his cancer detection and cure nano technology. They are examples of good Govermment. The non intervention by Governments in allowing financial engineers to stuff up the global economy is an example pf bad Government-just as the crooks of Wall Street are an example of bad business.

Tom Martyr:

06 Dec 2013 5:11:12pm

If what you say is remotely true and people really do believe that all the answers can be found, and all the problems solved in and by politicians then I want off this planet.

If i want to dig a swimming pool I'd rather have the salt of the earth guy from down the road and the one who keeps his lawn tidy from just round the corner helping me rather than a politician and a titan of industry. Thats all I'm saying

objective Phil:

06 Dec 2013 2:47:03pm

I too ponder the lack of sociability in Australian society. Unfortunately, it appears to have been tragically subdued by greed, power and selfishness. These are commodities Australian leadership have become good at in recent years. Indeed we are turning it into an art form that wins elections.

We will pay the price for this folly, and when we do I sincerely hope the politicians who allowed it to happen will be exposed for what they are. I have trouble coming to terms with the fact that we, the voting public, have allowed this to happen. The future is not looking good ....

TJ:

06 Dec 2013 10:00:44am

Sadly David I think you are close to the mark. I love the idea of keeping icons like Qantas but we have to accept if they are nationally owned then we must pay a premium for our own airline or sell it. The current situation cannot succeed. I note a lot of people who believe we should keep Qantas for emotional reasons have no problems personally using another airline. As far as the Australian economy goes I too fear we were heading for a major change since the GFC. It's not a LNP or Labor issue, it's a world economy shift and I am not sure Australian's are well equipped for it yet.

Mark O:

06 Dec 2013 10:01:19am

Maybe the union movement could do the hard yards and improve the lot of poor workers in other countries.

Labour costs here are just unsustainable in a globally competitive market. These costs are driving our businesses into uncompetitive positions and then the unions wonder why they are closing? Qantas has a big unionised workforce.

Yes business in Australia can automate and invest in things other than people, but until the unions recognise their work in this country is largely done, the situation cannot improve.

Union Leaders - do the hard yards in Malaysia, China, Indonesia, India, Vietnam etc. If you do, I will join up for the 1st time in my life, as you will then be part of the solution instead of part of the problem..

Tag:

06 Dec 2013 10:01:21am

I may be cynical but when is the next Fed election, would that be around the hinted Holden's departure date of 2016?

Not to mention SPC Ardmona, a company now owned by that impoverished corporation Coca Cola with a large Phillippino work force asking to get a handout to keep operating in Australia.If it was such a bad deal why would they invest by buying it in the first place if it wasn't for the possibility of getting access to subsidies, no it doesn't make sense.

This is just global pirating by the corporations.

Just where is Clive and Gina with their fortunes, why wouldn't they invest outside the mining industry now the mining boon is over, I know sand pits are more fun, but don't you worry about that!

Celarent:

anote:

I think the author is basically right but make serious errors in some of his examples.

There is a clear and obvious unnecessarily high risk leaving the country at the whim of a largre multinational with limited competition. That appears to be the case with GrainCorp.

It may be a good idea to work towards the world being a level level playing field but it is still far from it. Simply leaving Qantas to the mercy of the market is to follow an ideology to an extreme that may have the oppostie to the desired effect. For example, it will to some degree have the effect of subsidising other airlines already subsidised by other governments, of which Emerates may be a prime example.

It does make sense to extend the GST to online reatil despite it costing more than it makes so long as it serves the purpose of leveing the playing field without significantly making the overall system unrewarding. Where it is down right stupid is that it is unlikely to serve the basisc purpose of making domestic retailers competitive. The author is right about the government failing to provide the 'narative' (ie an overall honest assessment).

We now live in a world where we need to cope with oligarchs and virtual cartels; large companies with relatively little competition. The old overstreched ideas of free market competition have become even more useless as a tool for providing opportunity to fairly distribute wealth.

old67:

06 Dec 2013 10:12:54am

Really no wonder right across Australia the CEO,s and board members have been living on the gravy train for years to them profit or no profit they still get cashed up or even it goes bust still walk away cashed up ACCOUNTABLEY it never happens. As always the people of this country pay the price.

gray:

06 Dec 2013 10:42:26am

i thought tony abbott said australia is now open for buisness, hmmm they all seem to be packing up and leaving, good work tony, thats what happens when you allow overseas corporations to buy australian companies, they then shut them down and offshore them, free trade deals are they really in australias interest, i dont think so, holden and ford, the amount of money in licence fees that goes back to america is unbelievable, a smart man would let them go and take over there buisness and build a truly australian car that can be sold locally and overseas we have the people to do it, Qantas, simple get rid of allan joyce,

davidlb:

gray:

06 Dec 2013 10:53:05am

i forgot mining, should be selling metal instead of ore, more content in mines from aussie companies, stop corporations from offshoring profits, energy, stop selling all our gas overseas, have an energy policy that will keep an ongoing supply of cheap gas for australian manufacturing, i could go on and on, trouble is our pollies are bought and paid for and not by australians, only two bunchs of idiots to pick from

Stirrer:

06 Dec 2013 11:11:01am

There should be more articles like this. I said the same thing to David's previous article in the week.Thank you ABC for giving us such a wide spectrum of opinion- ABC haters please note.David is saying the same things as Dan Dennning of the Daily Reckoning Australia-that we blew an epic boom and are now heading for a recession.

Like Dan -David correctly blames successive Governments- the RBA-Treasury and all of our economic mandarins for the **it we are in.

I do not have the luxury of a five page commentary of the artlce- I have to keep it to less than one-two at the most- if the monitor will allow me two posts.David writes about the problem and that we should be preparing for a period of belt tighterning-taking down costs and and increasing productivity and competiveness. All very good stuff BUT he does not say HOW and other than a few words about protecting the vulnerable does not say anything about the consequences to our social cohesion of that HOW?His last para.says it all ' A great shock is coming to Australian entitlement in the next three years. its called capitalism my friends and it's here to stay here,ready or not"Well David my friend. I say capitalism is allreadyt here and has been for the past decade+. By capitalism I do not mean the wealth creating kind of free enterprise - I mean the wealth redistribution kind- the kind Satyajit Das refer to in "Extreme Money" as having created a colossal worldwide financial machine that makes a few individual staggeringly rich and sacrifices everyone else at its altar of risk".That is not the sort of capitalism I want. There I am out of space-more later.

carbon-based lifeform:

06 Dec 2013 11:16:10am

One of the former CEOs of Qantas put it correctly:BAD DECISIONS to try and compete with Virgin, then whining about Virgin's ability to get overseas funds.Sell off Qantas, they are not a true Australian company any more. Moving the maintenance bases overseas, sacking workers, paying themselves too much for poor performance.

We've wasted so much money propping up a car industry that won't go with the times of smaller cars.Holden and Ford AREN'T Australian companies.Most likely all of the government subsidies have been funneled back to head office in the US.

Tom Martyr:

06 Dec 2013 11:23:09am

We have on Ecconomic blinkers in this country. The short sighted mentality of our governments across BOTH houses shovel on the fuel and expect the wildfire never to strike. Wildfires breed new growth and can be cultured to maximise the benefits.

The issue with Australian politics is that the popular choice is always prominent and rarely the responsible option taken. At times when informed politicians know they should not be spending, they still feel the overwhelming need to announce a project of spending under the guise of job creation or job protection to 'boost' the ecconomy, however the balance is often absent or innadequate. It's an unsustainable false ecconomy.

Tight fiscal responsibility is not sexy, it doesn't win votes and cannot be lauded in front of the media like a new hospital or big spend on welfare policy. Announcments of dollars saved now will mean dollars in your pocket 5 years from now is treated as nil in the eyes of the public. We need to recognise good fiscal management for what it is and hate the game and not the player for responsible management because they are a product of our whim and fancy.

Maintaining an uncompetative business through public funding and allowing a few thousand jobs to remain just for now garners far more of a patriotic view of support whether individually affected or not. Holden will go eventually as will Toyota. Qantas will downscale it's patriotism and service only that which will give most return, if this is not enough it will go the way of Ansett or move offshore much like its now Malaysian service department. As painful as this transition is we should hasten it rather than sink good money after bad because companies will gladly accept help whilst planning exit stratergies for greener pastures..ie Ford and now Holdens revealed exit plans despite promised assistance.

I disagree we should be looking at closing up shop and bunkering down but a tectonic shift does need to occur in our thinking and planning. A renewed focus on our bread and butter markets such as cattle and a more sustainable resources sector isn't sexy but it will keep us afloat rather than this pie in the sky mentality of continually punching above our weight and the resulting 'endless' gravy train handouts from these Willy Wonka Pollies.

If we want new investment here it must be profitable and more appealing than Asia to setup, concessions for start-up small to medium businesses is a must with a view to long term sustainability. This is where the rescue package dollars should be invested, not in car makers or airlines who have shown an innability to compete. If we must support these industries it's imperative that we receive something in return. Something tangible like stock in the company for our many millions of support as you'd expect in a business arrangement. If not accepted then wave B-Bye and take the immediate hit for long term gain.

Lewis:

06 Dec 2013 11:23:26am

As someone who works up in the Pilbara for BHP Billiton I shudder everytime listening to ABC radio at the shear complacency and lack of understanding of business and how wealth is created. Gay marriage, asylum seekers and expensive socially progressive movements seem to be the priority issues. Not the fact that the previous government piled on the debt and structural deficit which is seeing us go the way of Europe with heavy public finance and over regulated and uncompetitive industry. Sadly, as a career politician I don't believe Abbott has the stomach to make the hard decisions required. Politicians rarely do as they want it to happen on someone else's watch. So the can gets kicked further down the road. Looking at Gove (Rio), Holden, Qantas and Graincorp I fear Australian will be left we nothing other than mining, and urbanites will continue seeing it as a cash cow instead of looking at creating other industries and ways of generating new wealth (what a thought).

Walter:

06 Dec 2013 11:24:24am

I agree with most of what you say. As a nation, we have priced ourselves out of may markets through our pursuit of entitlement. We have become fat and lazy. Asia, and others will pass us by.Six years of Labor has further entrenched the culture of entitlement, in the workforce, in the community, and in some sectors of business. If we want to compete successfully in the new global economy, then we need to migrate our workforce culture of entitlement to a culture of mutual obligation. That is employers to employees and employees to employers. It is only when this mutual obligation is in place that true productivity growth and genuine innovation will flourish.

Howard made the right start with Workchoices. It was the right move in the right direction, although poorly executed. The more employees and employers talk directly to each other, the greater the chance of encouraging a culture of mutual obligation. That will be the pathway to success in this century.

Tom Martyr:

06 Dec 2013 5:34:01pm

If I recall correctly Mutual Obligation was a welfare policy some years ago, may still be. From memory it had much the same design as you suggest but from all accounts required so much structured monitoring that it created more work just to adhere to it and monitor it that it became bound tight to the floor in red tape. Unfortunately Gov policy on WorkChoices, Mutual Obligation or Co-operative bargaining agreements by any name when facillitated by any government as a one size fits all approach have all failed dismally even on a small scale if given a tiny to medium timeframe.

It's a thought bubble of an idea you like Walt and I don't blame you because in theory communication is king however when they're run as they innevitably are there is none, only the obligation, paperwork and meeting new gov requirements remain which just bolloxes up the process.

rob:

06 Dec 2013 11:39:58am

Well we are really heading for the bag carrying nation. Forget clever, or even lucky. Without manufacturing skills we are reduced to consumers of cheap trinkets, easily manipulated by external influences by what they will pay for our dirt. Won't be too long when we will have to pay for everything that we now consider our right, health education and security.

john:

There are few in the business community let alone government that have any understanding of our position.

High interest rates are not a reflection of inflated assets and a vote on our economic performance but simply that our high interest rates are attractive to o/s investors.

We dodged the GFC due to good luck. The Reserve Bank was asleep on the job and still raising rates at a time it was obvious that there was a crisis about to unfold.

The reaction I got from circulating a number of spread sheets I had given to me from insiders in the USA at the time simply confirmed to me that many in business do not have clue and simply ride the prevailing trends.

I have little faith in big business or governments devising preemptive strategies to deal with what is about to rapidly unfold.

casewithscience:

06 Dec 2013 12:05:21pm

We should be cautious when businesses start blaming their own demise on "productivity". Productivity is merely the ration of dollar spent versus dollar gained. Usually, it is calculated by GDP per capita. This, however, is a completely illogical way to talk about the economy. For instance, where the iron ore price shoots up six times, but the work force remains stable, then the "productivity" of the industry goes up by the factor of six (less profit/loss, but still dramatically) yet the same work is being performed.

When management talks about productivity growth, what they are actually talking about is the increase in the distribution of profit from the workers to the owners of capital. When they say they need to increase productivity, this rarely means actually innovating, rather, it means sacking employees.

Stirrer:

06 Dec 2013 12:05:33pm

As I was saying in my previous post the sort of capitalism I think David is referring to is not the capitalism I want.

My fear is that the financial engineers, money manipulators and wealth redistributors will only grow stronger and richer. They will create a world where Labour is as free to move around the world as capital is-they will move people around as they do money.They will like nothing better than a great big pool of unemployed to help keep costs down and to serve the growing number of the global rich but at the expense of a much greater growing number of poor and working poor.Is that the kind of Australia we want? it will be if we allow the economic rationalists their way. The seemingly conflict going on in the ranks of the Government at present is not so much about a transition to the economic rationaslt world but about the pace of that transition and the political damage that will cause to the LNP.

The pity is that with the wealth of our resources- with the talents of our people and with our sense of mate ship and a fair go we do not need to allow the vultures to feed on us.yes- we damn well can have an airline icon like Qantas and a car munufacturing industry- and renewable energy.Yes= we can not only be part of the the Third Industrial Revolution but help lead it.We need a Government which is not a prisoner to powerful vested interests-that has the guts to do what is necessary and most of all we need business to take the long term view rather than its share price.

J.T:

06 Dec 2013 12:14:05pm

"The second point I've argued is that our economic mandarins of the day - Labor, Liberal, the executive and monetary authorities - would be serving the nation best by getting ahead of this adjustment. "

Stopped reading here.

It is not a correct role for government to lord over the economy. It is not a correct role for government to direct the economy. It is not a correct role for government to use a false science like Macro economics to limited or increase demand and supply.

Dear Mr Llewellyn-Smith, please point to what section in the constitution gives the Federal Government control over the private economy.

Thanks in advance, yours truly, a citizen concerned with the proper role for government in a free society.

Jay Somasundaram:

06 Dec 2013 12:39:58pm

On one hand, we keep pretending we believe in the ideology of free markets. On the other hand, we spy on our neighbours to gain commercial advantage, invade countries on the other side of the world to keep oil lanes open.....

If we want to survive next to them, we need to play the game as well the US and China do. Right now they are streets ahead of us. All we can do is exploit those countries below us in the pecking order. Even puny New Zealand does not pay tribute to the US pharmaceutical companies the way we do.

JohnC:

06 Dec 2013 12:40:28pm

Thank you David for an interesting article, a good deal of which I support. However, I think you would help us all if you expand on" the best way forward...." in your second second point paragraph. As they are, they would appear to be somewhat motherly.

Poisonous Mushroom:

06 Dec 2013 12:51:40pm

Get rid of all subsidies to businesses of all sorts and let them stand or fall by their own decisions, but hope upon hope the next war is nuclear as Australia will be unable to survive as an island for more than a week without recourse massive imports of to foodstuffs, medications and clothing let alone strategic goods.

Glenn Jacob:

06 Dec 2013 1:02:42pm

It would appear we are in for another "recession Australia has to have"? It has been a long time coming. Howard wasted the boom in ridiculous tax cuts and handouts because he did not have the wit to invest it. Rudd joined in at the 2007 election. Rudd then Gillard failed to grasp the value of using debt for investment in productive assets to steer us through the financial crisis and instead, opted for cash splashes and sundry wastes. It kept up employment and activity which was nice but leaves us with a hangover of unproductive debt, rather than the productive debt we could have had. The twin binges of mining cash flows and government debt cash flows that were directed into good times instead of good investment may well leave us feeling like the morning after a long night on the tiles. Howard, Costello, Rudd and Gillard have all gone on to collect their nice little pensions and you and I are left with the emplty bottle and the throbbing head. I am sure this time around, the treasurer of the day will not make the mistake of thinking he can explain to us how this medicine is the medicine we have to have.Pass the paracetamol.

Hudson Godfrey:

06 Dec 2013 1:06:48pm

I think we need to be very careful about assuming that because a private company suffers from incompetent or disinterested management, (perhaps the kind that is only interested in profiting by going offshore), that we share their disregard for Aussie jobs or even in fact that this means Australian industry can't compete if only it had the kind of leadership that was interested in trying to find business models that work!

Kevin Cobley:

Propping up of private businesses either buy grant, subsidy, tariff or some competition preventative legislation is just plain foolish.

The industries that are propped up never stop coming back for more and use threats to close to blackmail governments.

It's even worse for the aviation sector worldwide where these largely former state owned operations have operated by dumping large sectors of their costs onto taxpayers some like me that never use their services. Why to I as a taxpayer have to build new airports for them?If an airport is built it should be paid for by the airlines that use them not funded out of the public purse in the form of socialism for rich companies.Both the airline and automotive industries are in their terminal decline phase worldwide, Oil production peaked a few years ago and now the oil industry has had to move to produce from very expensive sources like Tar Sands and deep offshore again largely subsidised by stupid governments attempting to prop up a failing system.There is only one way both these industries are headed that's out the back door, let em die and give them no more money build no more white elephant roads or airports.

David Arthur:

So long as Australia keeps its moronic tax system, of course we're just going to go down the tubes.

We can a) raise the tax-free Income Tax threshold, andb) lower the Company Tax ratec) grow domestic industry and replace manufactured imports

if we1) replace the emissions production carbon tax with a fossil fuel consumption tax (border adjustment to include both carbon embodied in imported goods PLUS carbon burnt to ship the goods to Australia)2) replace the MRRT with a tax on exported raw materials to reflect the opportunity losty in not processing the commodity in Australia.

For more information, have a read of my submissions to MRRT Repeal Inquiry at http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/MRRT_Repeal_2013/Submissions, and to Climate Change Authority Targets and Progress Report at http://consultation.climatechangeauthority.gov.au/climate-change-authority1/submissions/8.

Michael:

06 Dec 2013 1:22:22pm

I have been noticing for the last eight years a gradual decline with small business. What little manufacturing we had has slowly been whittled down and is disappearing. I have been saying it for the last eight years we are in trouble. It is slowly happening. Qantas talks about shedding a 1000 jobs, but there have been losses everywhere, One Steel, Ford, Holden, 500 jobs to go in Orange from Electrolux as it closes the last Australian fridge manufacturing factory off to Thailand, Seawind catamarans closed down its manufacturing near Wollongong and now manufacture in Vietnam and on and on it goes. Thirty years ago I completed an apprenticeship at an aluminium smelter employing about 2000 people in Sydney now from what I have been told after the last round of redundancies there are only about 200 people employed in extrusion products only. If only we could all be school teachers, public servants, lawyers, doctors, unionist but we can't someone has to actually make things or create things but unfortunately it is going. Just wait until only China, India, Vietnam and similar countries are the only with the skills and ability to manufacture products they won't be doing it for next to nothing like now but demanding higher wages and better conditions charging more for their products and we will end up paying more. We need to start looking at wages as wages are not realistic for many. The ATO statistics for taxation show that if you earned $48,000 in 2011 you earned more than 50% of other tax payers. We are paying many far more than what they deserve and it is not the people at the bottom who are causing the issue it is the people who are higher up, management and those who have completed university degrees believe they should be paid more and public servants. I use Teachers as an example of public servants as they are always demanding more and more are demanding salaries of $100,000 for the best teachers the ATO statistics for 2011 show that if you earned over $89,000 in 2011 you earned more than 85% of other tax payers. Canberra is the true example of what happens when public servants are overpaid. Canberra has been booming for years and has the second best performing economy. What is made in Canberra or mined? Nothing it is just full of public servants and a service industry catering to their needs yet it is the second best performing economy. If that doesn't tell anyone that we have everything all wrong what does. But I just don't criticise public servants I also criticise company directors and managers overpaying themselves for what they do and paying little to their workers. Because when it all comes down to it the problem is greed and arrogance of those who have an education or position in power demanding more and more and being paid in excesss of what is really fair. Those demanding those wages are making everyone else pay for their greed and arrogance. After all if 50% of the population earn less than $48 a year how can anyone argue they are worth

Rick:

06 Dec 2013 1:30:52pm

Capitalism has just given us the GFC. Most of the institutions that gave us the GFC are still operating because of government intervention - along with Ford etc. As soon as they created that problem they all ran to the government to intervene to solve it. Governments, particularly those in Europe and USA have been slugging their workers ever since to solve the debt problems. Meanwhile the big bankers are back to business as usual - huge salaries and dubious practices.With respect to aviation Emirates, Etihad, Singapore, Malaysian, Air India, Air New Zealand are all either owned by or majority government owned by governments. Most of the US ones are either in or been in Chapter 11 Bankruptcy.As for motor vehicles there isn't a country in the world where the government (including the USA) doesn't support it's car industry.The idea that capitalism is the great solution is laughable.

crow:

06 Dec 2013 1:41:34pm

Virgin Blue started as a no frills airline. It wasn't really in competition with Qantas or Ansett. But Ansett was going under because of gross mismanagement which included endless cost cutting to milk value for its shareholders (Air New Zealand and News Corp). Many of the senior management team, including Alan Joyce, saw the writing on the wall and jumped ship.

After Ansett collapsed, Virgin filled the gap in the market and is rapidly becoming a full service airline. Meanwhile Qantas kept treading water under Geoff Dixon but started going backwards under Joyce. While Virgin kept improving, Qantas made its main brand product worse. Not just a little bit worse, a lot worse.

Joyce was too preoccupied with Jetstar and adventures in Asia to notice. Whenever anything went wrong with the balance sheet his only response was to blame external factors and sack more staff. He never once acknowledge that he might be doing something wrong.

Grounding the airline in 2011 was the final straw for me. After being stuck interstate for nearly 3 days I swore I would never fly Qantas again. I know I am not alone in this and that is why the losses keep mounting.

The only way to fix Qantas is for Joyce to resign. If he won't, the Board must sack him.

MJLC:

06 Dec 2013 1:44:51pm

The first restructuring needed would appear to be this article - any discussion of the economic mess this country is in that fails to include the names "Howard" and "Costello" even ONCE seems to be a very good example of gross Australian inefficiency.

If Mr Llewellyn-Smith entertains any possibility of having his views addressed it's necessary to get his audience to understand the problem - and THAT requires the myths of 1996-2007 to be fully exploded and that the entrails be spread in front of that period's idolisers for them to stare at until they do, indeed, appreciate the gravity of their mistaken thinking and behaviour.

Until that time, it's all just air being wasted on folk who aren't listening. Which is a great pity.

Stirrer:

06 Dec 2013 6:13:06pm

To be fair Davidf did refer to the three Governments- and the RBA and Treasury as being part of the problem. But you are absolutely right the myths of 1996-2007 have to be exploded for the sham that they are-the Howard Government led a debt driven economy and squandered the biggest boom in history. Rudd and Gillard did have the GFC to cope with-Howard did not.

Something David overlooks- as he did the sins of business and the financial industry.Where the Rudd and Gillard fell down is in not telling it as it is-in not standing up to powerful vested interests- in allowing Abbott's storm troopers to run the political agenda and in lacking the guts to be honest.I am still waiting for the ALP to grab the nettle and do what is necessary- while I agree with Shorten that he does not want ot be like Drr NO he does need to LEAD by suggesting alternative postivie policies to the destructive ones David seems to be.

Sarah:

06 Dec 2013 3:47:21pm

Well said Ken-they say Spain is out of recession-its economy is growing but it has 25% unemployment-50%+ among its young.As Alan Kohler indicated - growth without jobs is becoming the norm- something economic rationalists seem to like.The new Governmenrt has NO idea-other than let the market sort it out-stuff it further more likely,

FalKirk:

06 Dec 2013 7:48:06pm

What the new government has Sarah, is the inheritance of a $300 billion debt, with interest payments on borrowings growing exponentially and a local manufacturing sector growing more uncompetitive by the day thanks to Labor's phalanx of union linked Cabinet Ministers who treated business as an enemy instead of an ally.

Matt:

06 Dec 2013 5:04:34pm

The problem is that the economic prognosis outlined is for trading nations (such as ours). Nations that consume the trade are in a much better position. I fear that the political outcome of the economic prognosis is internalisation

X:

06 Dec 2013 2:12:29pm

There cannot be a reawakening of economic thought until economic academia has worked out what is the best forward, so at least the nation can understand the bitter pill it must take. Steve F's first comment shows that this is true - we MUST have Australians earning Bangladeshi wages if we expect to compete with them. Employers want skilled workers, people want money, the state provides education to get skills, banks want to profit, politicians like to stay employed... we can rely on self interest to drive this forward, and it can succeed, but only when people understand where they sit on the ladder and what that means in terms of future opportunities. I personally would prefer to take 5 bucks an hour if I can study TAFE at the same time, or develop a skill that gives me 6 bucks an hour. Our school system currently pays 0 dollars an hour; allowing young people to work real jobs isn't child slavery. It's acknowledgement that national productivity needs more than hand holding and head patting to be competitive. Everyone wants to succeed. Everyone can make it happen - but leadership is required to do it. Pointing fingers at people who simply obey the laws of the land isn't going to help.

M.S:

06 Dec 2013 4:25:02pm

I think we still need to work out a lot things before we go swallowing bitter pills X, though at least someone is exercising some vision here. Really we CANT have Australians earning Bangladeshi wages: predominately because we would need to overhaul our entire economy to adjust to terrible wages, living standards and even our values to even get close to having the competitive wages and productivity of our poorer neighbours. You would need a lot of trust in a hierarchical ladder of opportunity, for the employer or the employee, and I don't see that narrative taking off in our present circumstances.

This could ultimately risk the rebirth of industrial strife (unionism and the like), and productivity would then be dependent on industry shut-downs or how many of our skilled workers are going to leave the country for better opportunities, most likely in Asia, Europe and the Americas, because of the conditions that would be created here!

We probably shouldn't rely on self-interest as a motivator in any economy either, because its in everyone's self-interest in keeping the status quo we have now at the expense of the future. I seriously doubt the conditions for educational advancement would be available too as they are now in such an Australia, and I would be the first to leave with my skills if I wages were that poor.

TC:

Walter:

06 Dec 2013 4:38:12pm

Is that the same Paul Keating that manufactured the recession we "had to have"?From a business proprietors perspective, Keating was pompous and arrogant. Despite his many failings, he was in a different league to the hapless Wayne whatever his name is.

FalKirk:

P.Sam C.:

06 Dec 2013 2:51:35pm

The multinational companies rule the world They take their business to third world countries, where wages are low and taxes are minimal. Leaving workers in prosperous countries unemployed and wanting. Time these multinationals wereexposed and made to stop this new form of colonialism.

Mycal:

06 Dec 2013 7:49:20pm

Robert I'd agree with you were it not for the fact that you are wrong. Governments the world over pick up the tab on the basic research the drives innovation in the economy. Some large projects can only be done by Government and all the infrastructure of a modern economy is, in some way or another, funded, managed, controlled or directed by government.

TrevorN:

06 Dec 2013 3:11:41pm

You can get greater productivity if you strip wages and working conditions off workers but I'd suggest that you could get even greater productivity increases if you stripped back executive pay and conditions, removed their corporate credit cards, cars and private jets and used the money to buy better machines, introduce technologically advanced production methods and educating the workforce.

Tom Martyr:

06 Dec 2013 3:29:10pm

The cost of evenrything keeps going up disproportionately to wages, soon enough the ability to afford the basics will be a luxury which will force the dollar down and shortly after wages will come down.

Jimmy Necktie:

Investor:

06 Dec 2013 3:52:55pm

As at 30/9/13, Australia's net foreign debt was A$829,062,000,000 (source: ABS). A new record high. Australia's time of reckoning (i.e. a significant fall in the standard of living) will occur whenever those foreign creditors choose to withdraw their money. Entirely up to them. Perhaps they will start to wonder how this debt is to be repaid when it eventually hits A$1 trillion (in 2016).

TC:

06 Dec 2013 4:04:38pm

We also added a huge cost to our industries, aka the world's highest carbon tax. Qantas had to pay but its competitors didn't. Yep, that was really smart. We are in trouble but the unions and Lefties don't want to hear it. Get ready for the fear campaign. Smart balanced people in the middle need to ignore it.

Asceptic:

Asceptic:

06 Dec 2013 5:04:33pm

Our new motto has to be "Innovate or Die" ;-).

A few suggestions:

1. Complete the NBN. I think now that its time has come.2. Give everyone an ABN.3. Legislate the introduction of limited liability partnerships.4. Seize the plant and machinery in the car plants that the US car corporations are abandoning. we've more than paid the shareholders for the robots, lathes, and engineering facilities.5. Get rid of negative gearing, and land banking, the younger generation need to dream of buying their own house.

Bill.anderson:

06 Dec 2013 5:25:28pm

In order to live in a house in Australia you need to earn at least 400 dollars a week. That's 10 dollars an hour for a 40 hour week. If you want to engage in the exorbitant luxury of eating 3 meals a day add an extra 100 doallrs a week. Our competitors can live like kings in their countries for half of that. Why? because rich people get a tax break on their second house whilst driving the price higher. Average Australians then have to compete with these rich people. It is an impossible task. Australian workers have been ask to undergo most of the reform over the last 20 years. How about the tax system take back some of the burden by allowing them a tax deduction for the first roof over theiri head. House prices would then come down to what they should be and workers would be able to sacrifice more wage without their children ending up out on the street or hungry.

Sandy:

06 Dec 2013 5:28:30pm

When in 2011, Tony Sheldon and other QANTAS union bosses announced 'guerrilla' type of unannounced strikes any sensible person knew that it would all but destroy the company. QANTAS lost the majority of it's regular travellers because it could not guaranty any future bookings. It was such stupid industrial tactics of destroying the company that it paying your livelihood. The union members had many examples to see how such unreasonable tactics can destroy the very company they are working for. Remember ANSET?!

The problem is that our industrial relationship is based on antagonism and the old class wars. It is workers vs. the capital. There is no logic or sense applied.

Well, Tony Sheldon and the QANTAS engineers can now be proud of themselves. They won the battle with QANTAS. Such wonderful win that is likely to cost the jobs of all their colleagues. They can now sing: "We won..." all the way to Centrelink unemployment section.

M.S:

06 Dec 2013 5:37:36pm

I think despite a tone of pessimism in this article there are valuable points about what can happen if we can't maintain growth and expenditure, any politicisations of why aside.

I do think the global economic situation will improve, or that the circumstances will change with it and Australia's will adapt. We can certainly cut back on middle class subsidies and those to inadequate industries. Our current system of wages and productivity could be adjusted, but not collapsed as many seem to suggest.

If we are smart we can move away from the mining dutch disease of the 2000's, save our manufacturing and redirect production for high-tech components to meet foreign demands for such. We can improve and enlarge our agricultural export sector for the coming 'dining boom': feeding the new classes of people in the world with rising wages and a desire for quality and quantity. I really don't think excessive foreign ownership will help, and I think Qantas has had some serious management and corporate issues that can be fixed with either interventionist means (not nationalisation) or shareholder action.

FalKirk:

There are plenty of overseas interests prepared to invest in Australia if they are allowed. If not the locals and their jobs will go.

As for Qantas - their leadership has let the airline down b badly. If they can't remember what happened to Ansett then they are doomed to the same fate even though some of the factors are a little different.

Mycal:

06 Dec 2013 6:54:40pm

Howard squandered the mining boom income, handing the benefits of a mega boom back as middle class welfare and tax breaks did nothing to set us up for dealing with the aftermath. Rudd and Gillard may have saved us from the worst effects of the GFC but they did nothing about setting us up for the inevitable restructuring the has and will flow from it, hell they didn't even have "thought bubble" on the issue. Mr Abbotts contribution, basically to say no and take every opportunity to roll back to the 1950s. Graincorp, QANTUS and now GMH are all looking to take them and us down the protectionist, subsidy path.

But the sly won't fall David, agribusiness is looking good, a lower dollar will be good for manufacturing and exports. Tourism could pick up. Schrumpter is right, creative destruction is necessary for economic regeneration and it is our turn. Our task should be minimise the period over which it occurs and ameliorate its worst social consequences.

Peter:

06 Dec 2013 7:29:12pm

I think the real problem for Australia is the tyranny of distance. To overcome this issue it is obvious that the cost of doing business has to be significantly reduced. We need to become a very low tax country to attract investment and to compete against Asian countries. When I lived in Singapore years ago there was no welfare. Family members had to support each other through sharing money, housing and other resources. People are prepared to do any sort of work to earn money. If you visit Singapore today you will still see senior citizens working in fast food outlets and selling tissues on the street. Due to the country's low tax however, businesses are attracted there and many citizens are able to gain well paid professional jobs. Australia needs to adapt or the talented people of this country will abandon ship. (actualyy this is already happening)

Adz:

06 Dec 2013 7:30:32pm

I think the author is generally on the right track, though I don't think the situation is quite as dire as he makes it sound. Many Australian businesses have been adapting to our economic circumstances and the high dollar already - some by folding altogether, some by actually focusing on reducing costs, implementing new cost-saving technologies, improving management, or finding niches. Yes it's been tough but productivity is actually improving (though maybe not as much as people would like).The government doesn't need to completely rejig industrial relations or go on a massive deregulation spree to improve productivity, but I too don't think they should be propping up failed businesses or poor management after already giving them a big helping hand.

Free trade is the oldest argument in federal politics and the issue that literally defined the federation era but opposition exists to the TPP, courtesy of the Investor-State Dispute Resolutions clause.